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Constantine Cannon Announces Record $70 Million Whistleblower Settlement for Alleged Municipal Bond Fraud and Price Fixing

Posted  March 22, 2024

The Constantine Cannon whistleblower team is pleased to announce a $70 million settlement for its client Edelweiss Fund LLC in a whistleblower lawsuit against eight of the nation’s largest banks, making it the largest reported settlement ever under the Illinois False Claims Act.  Constantine Cannon originally filed the action in 2014 and since then has built up the Edelweiss legal team with multiple firms across the country, including Schneider Wallace Cottrell Konecky; McKool Smith; Behn & Wyetzner; DiCello Levitt; Steyer Lowenthal Boodrookas Alvarez & Smith; Whistleblower Law Collaborative; Stone & Magnanini; and Howard Law.

With its lawsuit, Edelweiss alleged that various affiliates of Bank of America, Barclays, Citigroup, JPMorgan Chase, Morgan Stanley, Fifth Third Bancorp, BMO, and William Blair engaged in widespread fraud and collusion in the fees they charged and the interest rates they set for Illinois tax-exempt municipal bonds known as VRDOs.  Specifically, Edelweiss alleged that while Illinois hired the defendant banks to market and price the bonds at the lowest possible interest rates, the banks engaged in a scheme to inflate the rates to collect millions in fees without providing the services for which they were retained and to avoid having the bonds tendered back to them.

Edelweiss has brought similar False Claims Act lawsuits alleging VRDO rate setting fraud and collusion on behalf of California, New York, and New Jersey, and those lawsuits are continuing.

Johan Rosenberg, the principal of Edelweiss with more than 30 years’ experience advising municipalities and other clients on VRDOs and other types of municipal bonds, stated: “I am gratified by the settlement.  My goal when I started scrutinizing the manner in which rates on VRDOs were reset in about 2010 was to shine a light on this market because of the benefit the public receives from the critical government projects that VRDOs fund.  In the years since the litigation began, we have uncovered much that was unknown about how this market is operated and how remarketing agents behave.  I remain hopeful we will obtain similar results for the other states.”

Constantine Cannon partner Gordon Schnell stated: “we are very excited by this landmark settlement and look forward to our continued work on these matters in the other states.”

Constantine Cannon partner Seth Greenstein added: “this settlement is a testament to the persistent efforts of Mr. Rosenberg and Edelweiss to push these cases forward in a manner that best serves the interests of the state and local governments that issue these bonds.”

Constantine Cannon partner Joel Chernov further added: “Obtaining such extraordinary results on behalf of whistleblowers in general, and Mr. Rosenberg and Edelweiss in particular, is most gratifying.”

Under the False Claims Act in Illinois, numerous other states, and under federal law, whistleblowers can bring lawsuits on behalf of the government against those committing fraud against the government.  In return, successful whistleblowers can receive up to 30% of what the government recovers from the lawsuit.  For its successful settlement in Illinois, Edelweiss received the maximum reward of 30% of the government’s $48 million portion of the settlement.  The remaining $22 million went towards Edelweiss’ legal fees and expenses in bringing the suit.

Read more here: Bond Buyer; PR Newswire

About Constantine Cannon LLP

With offices in New York, Washington, D.C., and San Francisco, Constantine Cannon has one of the largest whistleblower practices in the country.  The firm’s team of dedicated whistleblower lawyers represent whistleblowers under the False Claims Acts (both federal and state); the SEC and CFTC Whistleblower Programs; and the whistleblower programs covering money laundering and sanctions violations, auto safety, tax fraud and various other areas of fraud and misconduct.

The firm’s experience, which includes internationally-recognized antitrust and commercial litigation practices, spans across multiple industries including healthcare, government contracting, pharmaceuticals, education, financial services, securities, commodities, telecommunications, transportation, insurance, and technology.

The Constantine Cannon Whistleblower Team has been responsible for many major successes over the past two decades, with several of them achieving record recoveries for the government and the firm’s clients.  In total, our representations have led to more than $1 billion in government and whistleblower recoveries.  This is in addition to the more than $5 billion we have recovered for the firm’s other clients, including two of the top five antitrust settlements in U.S. history.